4 mistakes to avoid when opening a new credit card

4 min readOct. 8, 2018

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Gone are the days where the only way to get a new credit card was to fill out a lengthy application, send it back to a credit card company in the mail, and cross your fingers, for weeks, waiting to hear if you got approved.

If you have under five minutes, you can apply for a new credit card online, and wait less than a few days, sometimes even less than a minute, to find out if you’ve been approved. That means, if you’ve heard about a credit card that offers a deal that seems fitting to your financial situation, you might be quick to jump online and apply for it.

According to data from Gallup, the average American has 3.4 credit cards. Though with new credit card offers coming out on a quarterly and yearly basis, consumers might find themselves with a wallet full of plastic and a card for every need.

Before pressing the send button on a credit card application, consider these four common mistakes to ensure your new card meets your financial goals and won’t hurt your credit score.

1. Getting a card that doesn’t fit your needs

One of the most tempting parts about getting a new credit card is the possibility of benefits the card offers you as you spend money every month. Some cards give you points for each dollar charged, allowing you to then use those points for rewards that vary from airline miles to retail discounts. Other cards give you cashback when you purchase items in a specific category (like groceries or gas) or have a set cash back program that gives you a percentage back on your total purchase balance.

The most common types of credit cards fall into these categories:

Balance transfer — These credit cards let consumers transfer a high interest credit card balance onto a credit card with a lower interest rate. Be sure to read the terms of the balance transfer credit card, since the offers vary.

Cash back — This type of credit card gives you the opportunity to earn cash back rewards for making purchases. Every time the card is used, you’ll receive a percentage of cash back. Most cash back cards earn consumers around 1% of total purchases, though some credit cards come with unique offers around purchasing items in specific categories.

Reward points – These credit cards give cardholders the opportunity to accumulate points, based on their total purchase balance each month, toward a reward program. There are credit cards with general reward offers, giving cash points for gift cards, jewelry, and more. There are specific reward programs that put your points toward one specific category, such as airline miles or hotel stays.

Rachel Kampersal, an associate at American Consumer Credit Counseling, recommends that consumers find a card with the best overall value for them by looking into the pros and cons of each card.

“Look for a card with a reasonable APR, no annual fee, and benefits like cash back or other perks,” Kampersal says. “For example, if you aren’t an avid traveler, will frequent flyer miles really benefit you? Also beware of “limited time” offers. These offers have great introductory periods, but once they end, the consumer can be on the hook for high fees, interest rates, and more.”

Kampersal says that many people make rash financial decisions or take the first credit card offered to them, but consumers should remember that credit is an important financial indicator and opening a new credit card can hurt a consumer’s score if they are not prepared. She also reminds people that if an offer seems too good to be true – it probably is.

2. Rushing into a credit card with a balance transfer option

If you’re set on opening a new credit card for the balance transfer option, it’s important to know the exact terms and conditions of the credit card you’re looking to pursue.

Stacy Caprio, a financial expert forDealsscoop, reminds people that even when they see a balance transfer credit card offering them a low or 0% interest rate for a year, that they shouldn’t just sit back, relax, and forget about their debt for the next 365 days.

“When people think they can get “free money” or not have to pay their debt by pushing back payment with 0% interest for a year, this starts to encourage a mindset of spending even more on other cards and go into a negative cycle,” says Caprio. “Also, when the time does come, they will still have to pay off all the debt with high interest rates anyway.”

Caprio recommends thinking through your goals before opening up a credit card for balance transfer purposes and advises people to dip into their savings to pay off all their debt at once, rather than opening another credit card that could encourage more impulse purchases.

3. Not looking at their overall future goals

Before opening a credit card, it’s important to remember that your credit score will be affected by this new decision. Kampersal reminds consumers that new credit accounts for 10% of your credit score history. This means that opening a new credit card will cause a dip in your score.

Kampersal recommends that if you’re in the process of applying or considering applying for a loan (car, mortgage, etc.), either do so before opening the new card, or wait until you’ve used the new card responsibly for a few payment cycles. That way, your credit score will be rebuilt.

“People commonly make this mistake by not considering how credit can impact their future goals or “next steps”,” says Kampersal. “Credit is a huge factor in your financial well-being, so make sure to create a plan to help time decisions appropriately.”

4. Closing an old credit card to open a new one

Just as a new credit card can cause a dip in your credit score, deciding to close a credit card that has a long credit history can do the same thing. Kampesal reminds consumers that 15% of their credit score is made up of the length of your credit history, so closing an old account in favor of opening a new one can hurt your score.

Kampersal advices that if you absolutely must close an account, avoid closing a card you’ve held for a long period of time.

“If you can’t manage your current credit situation, adding a new card to the mix will only make it worse. You are still responsible for any outstanding payments on a closed card,” Kampersal says.